Some observations on forecasting and policy

This paper offers some thoughts on the use of macroeconomic and financial forecasts in monetary and fiscal policy. It stresses the role of nowcasting in constructing good forecasts: most of the value added in macreoeconomic forecasts comes from getting a good approximation to the jumping-off point. Some specific applications are discussed: long-range debt/GDP projections and forecasting recessions using asset prices. I also discuss the construction and use of density forecasts.